Claiming travel expenses using the substantiation exception

Work related travel expense claims have become an audit target in recent times. Especially for those claiming travel expenses who use the substantiation exception and claim deductions within the ATO’s published “reasonable” amounts. These claims can be quite significant and can result in large refunds which is why the ATO have set their sights on catching out the illegitimate claims.Claiming travel expenses

When an employee receives a travel allowance for work related travel they are not required to provide receipts for travel expenses incurred (e.g. meals, accommodation and incidentals) provided that the following three conditions are satisfied:

  1. The travel allowance received is a bona fide (genuine) travel allowance. A travel allowance is considered bona fide if it is an amount that can be reasonably expected to cover accommodation, meals or other incidental expenses associated with the travel. The ATO does not have a minimum set amount per day to be considered bona fide, rather, it is determined on a case by case basis focusing on whether the allowance would be expected to cover the travel costs.
  2. The travel allowance must have been paid to cover a specific overnight trip. It cannot be an amount paid at an hourly rate for certain hours worked; this does not constitute a specific trip.
  3. The travel expense claims must not exceed the relevant reasonable travel amounts prescribed by the ATO, which provide specific daily rates for accommodation, meals and incidentals depending on salary and location of travel. For the substantiation exception to apply, the travel claim must not exceed these daily rates.

If the above conditions are met then you do not need to provide receipts under the substantiation exception when claiming travel expenses. However, the ATO still require that you provide evidence on how you calculated the travel claim and that the amount claimed was actually incurred. This can often be through bank and/or credit card statements.

Pro Tips:

There is a common misconception that if you receive a travel allowance you are entitled to claim up to the ATO’s reasonable amounts. This is not the case; you can only claim expenditure for amounts which you can show were incurred.

Regardless of the substantiation exemption, keeping receipts for all travel expenses will avoid any uncertainty about what travel expenses you can claim.

Related blogs:

Employee travel expenses
Home to work travel – is it deductible?
What can I claim in my tax return without receipts?

Author: Allan Edmunds
Email: allan@faj.com.au